Pay down debt, or save as much money as possible?

Question

Hello,

For the last 5 months or so I have been reading as much about real estate investing as possible, trying to analyze deals in my area and save up as much money as possible; however, I am stuck between trying to pay down debt or make the minimum monthly payment on my loans.  I have student loans (~180/month @ ~4.5% interest) and a small car payment (~$251/month @ 5.4% interest). Do I try to wipe out my car debt with what I have saved so far, delaying my time I enter the real estate investing market?

I appreciate your feedback!

-Nick

Joe Ferguson · Answer

I thought alot about this at first as well. I also have student loans and a car payment. I ultimately decided that taking the money I could use to pay off my car would be better spent on house hacking a 3 or 4 unit. Paying the car off saves me $400 per month. Worst case scenario on the multi I live for "free" which saves me my current rent of $700 per month. With 4 units I'm hoping to have a little positive cash flow to add to that. That same amount of money makes me twice as much, gives me a free place to live and gets me into the real estate game. The car can wait. One mans opinion of course.

Account Closed · Answer

There's an even worse case scenario when you're broke, your four-plex needs a new roof, and you have vacancy for four months.

Nick Barber · Answer

Thanks all for the feedback!

Terri Dyer · Answer

I would get your debt paid down or off.  Look at how much money you are losing every year in interest.  That is money you could be saving toward real estate investing.  Plus real estate investing will actually make you money.  Car debt only losses equity and doesn't make you money.  I love Dave Ramsey.  Check out his radio show, check his book out at the library, or take one of his classes in your local area (usually at churches).  His financial advice is life changing.

Pay down debt, or save as much money as possible?

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